The day after Jerome “Jay” Powell was ambiguous about the next move from the Fed, economic data released this morning for the ISM manufacturing as well as Construction Spending came in well below Wall Street consensus.

July ISM manufacturing came in at 51.2 from 51.7 in June; the street was looking for 52.0.  Its clear manufacturing is getting worse, and in fact, the decline has steeped in recent months bringing the headline number to its lowest level since August 2016.

ISM Manufacturing

I think the more worrisome part of the report is the prices paid, which underscores the notion deflation could be lurking.   Prices paid are freefalling with July landing at its lowest level since May 2016.

Construction Spending also plunged, down 1.3% from June and -2.1% year to year.  Particularly worrisome is sharp private declines, -12.0% for commercial and -15.3% in education.

Private 962,943,000,000

• Residential 507,231,000,000
• Non-residential 455,712,000,000

Public 324,055,000,000

• State & Local 300,715,000,000
• Federal 23,339 ,000,000

Total 1,286,997

US Construction Spending

Is the Oil Miracle Running Dry?

Concho Resources (CXO) posted earnings of $0.69 missing consensus by $0.05, but the more problematic part of the financials was realized prices per barrel $36.02, which missed the street $37.44.   This is one of my favorite Permian ideas, and now I’m really worried. 

There has been scuttlebutt about peak Permian, but industry folks tell me that’s not correct.  These oil stocks were already spinning their wheels, but the reaction to this news is a huge red flag.  We’ll do more work.